UPDATE 1-Puerto Rico seeks dismissal of U.S. bond funds' lawsuit
(Adds details from filing, background about restructuring efforts, bylines)
By Tom Hals and Nick Brown
July 21 (Reuters) - The U.S. commonwealth of Puerto Rico asked a federal court to dismiss as premature a lawsuit filed by U.S. mutual funds that sought to strike down a recently enacted Puerto Rican law that the funds said posed a threat to American investors.
The law, known as the Public Corporation Debt Enforcement and Recovery Act, allows certain public corporations to modify their debts.
The passage of the law in June spooked the $3.7 trillion U.S. municipal bond market and weighed on prices of bonds issued by Puerto Rico's electric authority, known as PREPA.
Puerto Rico said the lawsuit, brought by bond funds run by Franklin Templeton and OppenheimerFunds, was untimely because PREPA had not sought to restructure its debt.
The lawsuit "should be dismissed on ripeness grounds unless and until PREPA files for relief under the act," the commonwealth said in Monday's filing in federal court in San Juan.
Puerto Rico has about $73 billion of debt, of which roughly $19 billion is in its public corporations, according to an estimate by Barclays.
By allowing its public corporations - but not the government itself - to restructure under the Recovery Act, the government hopes to reassure bondholders that it will not get tied down in bailing out its public agencies. Continuación...